Global Trends

Twists and Turns Along Britain's Private Route

GREAT BRITAIN-One of the most important positive developments in Great Britain is a genuine debate about the welfare state. Even the BBC used its flagship current-affairs program, Panorama, to analyze the future of government spending and taxation given present statutory commitments to entitlements, as they are called in the United States.

In one sense, the Tories are being very brave in attacking the sanctity of the welfare state. They have, for example, actually lopped off administrators from the National Health Service. In another sense, the party's commitments are a load of talk and not much go. Lord Carrington, the former foreign minister, came out and suggested that perhaps it is time for government to reduce its welfare functions. The thought was absorbed, sagely accepted as perhaps an inevitability, and nothing has happened since.

The Tories have pinned their flag to lower taxes but haven't been able to actually do much to cut spending. There is, however, a genuine review of spending options going on inside the civil service. One of the main targets is local governments. Already there's a planned statute to limit the taxes they can impose. Although the act has no provision for reducing the functions of local governments, it would at least put a ceiling on local tax increases.

The trend toward privatization continues. Proceeds from denationalized state-owned industries and real estate are forecast to bring in about $12 billion in the next three to four years, up from $3 billion brought in during the first Thatcher term. Slated for privatization soon are 51 percent of British Telecom, the telecommunications monopoly; the British Airports Authority; the Royal Ordnance factories; and British Airways.

There is much discussion of selling government-owned real estate. Michael Osborne, an analyst with a London stock brokerage, estimates that real estate sales alone could bring in some $405 billion-enough to finance the government's deficit through the year 2010.

Meanwhile, the Economist has been urging that the Tories "have the courage of their radical-right convictions" when it comes to privatization. A British Airports Authority memorandum recently argued for selling its seven airports as a single unit, because this would preserve crosssubsidization of unprofitable airports by the profitable ones. But "crosssubsidization is exactly what recompetitioning in Britain should not tolerate," argued the Economist.

Likewise, the magazine warned against merely selling shares in government-owned enterprises. "A British Gas or British Telecom with half its shares held by the public, will merely be a partly state-owned public monopoly.... Britain would be reinventing the sort of public utility concept that Americans have been trying to bury since 1940." For the benefit of consumers, urged the Economist, state monopolies should be broken up and barriers to entry into a market, such as telecommunications, removed.

Similarly, local governments should not keep barriers to entry in place when they privatize garbage collection and hospital laundry service by awarding exclusive franchises, thus installing a private monopoly in place of a government one. "It should be made as easy for households to pick their own rubbish-collector as it is to pick their milkman," the magazine said.

So the political sea-change is not free of problems, but it's become an established option in the British mind to go the private route on many things.

Eben Wilson

Capitalist By Any Other Name...

HUNGARY-Issuance of corporate bonds, proposals for stock markets, political elections with competing candidates, and widespread small-business enterpreneurship are not terribly unusual-except that they're cropping up in Hungary.

After coordinating the Soviet invasion that crushed the popular Hungarian uprising in 1956, Yuri Andropov, the wily Soviet ambassador to Budapest at the time, engineered the installation of Janos Kadar as Communist party chief. It was an inspired choice. Kadar was and still is absolutely loyal to Moscow, but he is also a little more temperate than other Eastern European dictators.

Under Kadar, there have been no more large-scale revolts, and Hungary has remained a steadfast member of the Warsaw Pact. But from Moscow's standpoint, there is a price for this stability-a series of Hungarian deviations from Communist orthodoxy.

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